The pound fell 0.2 percent to $1.2832, nearing a the two-week low of $1.2725 reached last week. Its weakness was less than some of its peers -- the euro fell 0.4 percent against the Swiss franc.

The Northern Irish Democratic Unionist Party, which props up British Prime Minister Theresa May's government, has said May ought to demand a better deal from the European Union on the terms of Britain's departure.

Growing opposition to May's draft arrangement has hit sterling hard in recent days, pulling it down nearly 3 percent from a Nov. 7 high of $1.3176.

Markets will focus on Bank of England Governor Mark Carney's testimony to the Parliament, where he might face questions on how the central bank responds to a no-deal Brexit.

"While Carney has previously said the Bank wouldn't necessarily respond to a no-deal Brexit by cutting interest rates, as it did after the referendum vote in 2016, he and his colleagues will likely get grilled on this point further," said Marshall Gittler, chief strategist at ACLS Global.

Derivative markets painted a broad picture of caution with short-dated sterling risk reversals at their lowest levels since July 2016, indicating investors were still expecting more pound weakness.

Against the euro, the pound was broadly flat at 89.06 pence. (Reporting by Saikat Chatterjee;)